cPPA - comprehensive support for businesses

Large Retail Company in Poland

Situation:

The client is a key player from the retail sector with significant electricity consumption and over 8,000 connection points. The company has ambitious ESG plans as regards reduction of Scope 1 and Scope 2 emissions by 25% by 2026 and even more ambitious targets for the following years.

Challenges:

[Complex ownership] The complexity of the structure in the franchise business model and the ownership of the stores proved to be a challenge as regards the structuring of the cPPA for the company. Prior to contracting PwC, the company was considering a physical PPA solution for their business goals. [Volatile market conditions] The company was pursuing a cPPA during a time of very volatile electricity price changes in the Polish market that were partially caused by the war in Ukraine.

Solution:

PwC as the leading advisor developed a strategy to support the purchase of electricity from renewable energy sources (RES) – using a cPPA and support in its operationalization. As a result of our initial work, the company selected a virtual PPA as a leading solution. PwC provided end-to-end consultancy on securing cPPA contracts during negotiations that took many months to complete. Due to this project:

• The client successfully signed two cPPAs for a volume above 2 TWh over the lifetime of the contracts.
• The client signed contracts in which the price was > 30% lower than those previously sourced by the company itself.
• ESG plans were fulfilled.
• A long-term hedge of electricity price was put in place.

KGAL Investment Management

Situation:

The fund decided to explore signing a cPPA for its windfarm portfolio in Poland. During the project, the company assessed that this solution provided a viable opportunity to de-risk the project, hedge revenues over the long term, and boost the revenues of the windfarms via contracting a cPPA.

Challenges:

Contracting a cPPA in Poland required an extensive search of optimal offtakers and negotiations. A deep understanding of the extensive offtaker market comprising international and local companies and these companies’ needs was vital. KGAL reached out to PwC who proposed unique value propositions as regards delivering the project results. PwC’s tasks in the project included:

• Finding an energy-intensive customer interested in purchasing electricity from RES
• Negotiating satisfactory contract terms
• Signing a contract as rapidly as possible
• Assisting in discussions regarding the solution with relevant shareholders (e.g. banks)

Solution:

PwC as the leading advisor conducted a research and prepared a long list of potential offtakers which was shortened after consultation with the client. The next stage of the project was negotiating with counterparties on key parameters of the term sheet and selecting the offtaker. PwC also supported preparation of the final agreement. As a result of the project, KGAL signed a cPPA for 15 years and will sell approximately 230 GWh annually to Lafarge.

T-Mobile Croatia (Hrvatski Telekom)

Situation:

Hrvatski Telekom is a Croatian company which dominates the Telcom industry in Croatia. The company sought to fix a long-term price, ensure regular delivery of electricity, cover a significant volume of electricity consumption from renewable sources, and guarantee long-term financial electricity price stability.

Challenges:

• At the time of project kick-off, no cPPA contracts had been signed in Croatia.
• Due to early market development stage, key aspects of the cPPA contract were challenging, i.e.:
  • 1) Finding a satisfactory offer on a developing market / what type of cPPA should be selected.
  • 2) Contracting the physical electricity supply to match the cPPA terms to properly hedge pricing risks.

Solution:

PwC as the leading advisor conducted a research and prepared a long list of potential generators. The next stage of the project was negotiating with counterparties on key parameters of offers and selecting a counterparty. PwC also supported the preparation of a suitable final agreement. As a result of the project, Hrvatski Telekom signed a cPPA for 10 years and will purchase around 50 GWh electricity produced by wind powerplants in Croatia.

Volkswagen Group Polska

Situation:

Volkswagen Group Polska is a leader in the Polish automotive industry, which is highly energy demanding. The group strategy is to reduce greenhouse gases emissions and so it needs to develop a new electricity purchasing strategy.

Challenges:

• Multiple shareholders involved in the project
• Complications with regulatory environment during the project related to market interventions, price capping systems, etc.

Solution:

PwC as the leading advisor conducted an analysis of VWGP's current situation and the company's operations from the perspective of its energy strategy and the needs defined by the company. The next stage was the development of a catalogue (“long list”) of recommended scenarios based on the target energy strategy for VWGP, with an appropriate justification for each of the indicated scenarios.

Orange Romania

Situation:

The company was under pressure to meet ambitious RES goals set globally by the group. To meet these goals, Orange Romania sought to sign a cPPA contract in Romania. At the start of the project, no cPPA contracts had been signed in Romania.

Challenges:

• The project involved multiple challenges for PwC and Orange Romania teams including changes to the regulatory environment, especially related to price capping for renewable energy sources.
• The early stage of RES projects in Romania involved pressure on negotiating delayed COD terms.
• Recent acquisition of a separate large telecom company by the Orange Group that required including this entity in the project.
• The early stage of development of offering physical purchase products on the Romanian market.

Solution:

PwC as the advisor conducted end-to-end advisory support for Orange Romania, which led to the final signing of a cPPA contract for Orange Romania. This support included:

• Setting the energy strategy for the group in Romania
• Establishing the parameters of the cPPA contract
• Identification of potential suppliers and reaching out to these entities
• Negotiations of term sheets
• Negotiations of contracts

Supplier of automotive / construction industry (CEE)

Situation:

As a part of its energy strategy, the client decided to purchase green electricity via a cPPA and signed a virtual cPPA.

Challenges:

A virtual cPPA is treated as a financial instrument with clearly associated obligations (under IAS and IFRS). This can result i.a. in undesirable volatility of financial results presented in the profit and loss statement. This accounting treatment was identified by the Client as a major challenge with respect to signing a virtual cPPA contract.

Solution:

PwC conducted a feasibility study for the implementation of hedge accounting in relation to electricity price volatility risk. The study presented the requirements under local and international accounting standards for implementing hedge accounting and indicated potential risks associated with hedge accounting for entity.